The Need for Regulatory Data Protection in the TPP: Why Australia’s Got it All Wrong

An aspirin won’t substitute for penicillin. Both are valuable, but they serve different purposes. The same is true of patents and regulatory data protection, though Australia’s Trade Minister Robb doesn’t seem to understand this.

Australia’s Trade Minister Andrew Robb recently remarked that Australia’s patent system is better for biologics than the United States because the US Supreme Court’s Myriad decision narrowed patentable subject matter in the US.[1],[2] He goes on to claim that because of this Australia does not need to alter their data protection term or other components of their IP system as part of a final Trans-Pacific Partnership (TPP) package.

Unfortunately Trade Minister Robb’s confusion could have serious consequences for the future of both the TPP negotiations as well as global public health. Simply stated: patents and data exclusivity protection are not substitutes and Australia’s existing patent protection regime does not preclude the need for sufficient data exclusivity protection for biopharmaceuticals. Rather, patents and data exclusivity protection are complementary, serving distinct purposes and incentivizing innovation in distinct ways.

While patents protect innovations that are novel, nonobvious and useful, data exclusivity protects the extensive preclinical and clinical trial data required to establish new therapies as safe and effective. Due to the time consuming drug-development and regulatory approval processes, effective patent terms rarely correspond to FDA approval. Given this, innovative firms may see their patents expire shortly after the product gets to market, providing them with no opportunity to recover their tremendous investments of time, talent, and financial resources. Regulatory data protection safeguards this data for a limited period of time, preventing competing firms from free-riding on the data that was generated at great expense. Specifically, biosimilar firms seeking regulatory approval are required to produce their own preclinical and clinical trial data to establish safety and efficacy, or wait the set period of time after which they are able to utilize the innovator’s prior approval in an abbreviated regulatory approval, eliminating the need for independently generated data.

To this point, biologic medicines are fundamentally different from traditional “small molecule” therapies. Accordingly, this creates a number of new challenges in both the design and enforcement of the intellectual property (IP) architecture that will protect so-called biologics.[3] Biologic medicines must be produced with tremendous precision and under very specific manufacturing conditions which greatly complicates the logistics of protecting their intellectual property. As a result, patents alone are insufficient for protecting the IP they embody, necessitating data exclusivity protection as well.

[Kristina]

Australia doesn’t seem to recognize the necessity of regulatory data protection and the clear benefits that it generates. Clinical testing is expensive. Very expensive. Recent estimates indicate that a single clinical trial can cost $100 million at the high end.[4] In order to incentivize this investment, firms must have some assurance that they will reap the rewards of a successful innovation. Data exclusivity does exactly that. In addition, data exclusivity protection incentivizes the exploration of additional indications for existing drugs.

Given the tremendous cost of drug development it makes medical as well as financial sense to utilize safe, effective, existing therapies to the greatest extent possible. We should seize the opportunity to use medicines that are known to be safe to treat as many conditions as possible, getting the greatest benefit from the tremendous investment needed to develop a single drug. Data exclusivity enables firms to invest in clinical trials to explore using an existing therapy to treat additional indications. Without the protection of this data, firms have no incentive to make the significant investment in clinical trials to establish the effectiveness of an existing drug to treat a new condition.

To illustrate what this means, consider the case of Viagra, sildenafil (a PDE-5 inhibitor). While research efforts were originally designed to target angina, a painful cardia condition, it was discovered to enhance blood flow to a different organ than initially envisioned. The rest is history and Viagra became the first drug to safely and effectively treat erectile dysfunction. However, researchers from Sapienza University in Rome have now found – through a meta-analysis of numerous randomized controlled trials – that continuous use of sildenafil improves cardiac performance. The authors write, “With respect to the initial purpose of the study, we showed that in selected cohorts long-term continuous PDE-5 inhibition can produce clinically meaningful improvements in cardia remodeling and performance with an excellent cardiovascular safety and tolerability profile even in older patients and under prolonged use.”[5]

To establish the value of sildenafil for heart failure patients, large clinical trials are needed on the long-term effects of continuous use. However, no firm has the incentive to invest the hundreds of millions of dollars needed for these trials. As described by John LaMattina in Forbes, “It is possible that an entity like the NIH would take this on. However, the cost and complexity of such a study, particularly at a time of tight budgets, may make it prohibitive. In this time of reining in healthcare costs, the potential of PDE-5 inhibitors as drugs for treating heart failure may never be realized.”[6]

Data exclusivity protection is a remedy to this dilemma, ensuring that firms do have an incentive to invest in the study of treatment for additional indications. This is smart medicine and an investment in improving global public health. The TPP should embrace this opportunity. And so should Australia’s Trade Minister Robb.

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[1] Association for Molecular Pathology v. Myriad Genetics, 12-398.

[2] For a discussion of the Myriad decision, please see Stohr, Greg, Susan Decker, and Robert Langreth. Gene Patents Limited by Court in Mixed Ruling for Myriad, Bloomberg Business, online edition, 13 June 2013.

[3] As I described in an earlier IPWatchDog post, historically, pharmaceuticals have been small, chemically manufactured molecules and these molecules still comprise more than ninety percent of drugs currently available. “Small molecule” therapies are synthesized by chemical reactions between different organic and/or inorganic compounds. In comparison, biologics or large molecules are therapeutic proteins and are most often derived from living cells. Biologics are produced from micro-organisms or animals by utilizing the metabolic processes of the organisms themselves.

[4] Herper, Matthew. The Truly Staggering Cost Of Inventing New Drugs, Forbes, online edition, 10 February 2012.

[5] The study is described in: LaMattina, John. Viagra Protects the Heart – Now What? Forbes, online edition, 21 October 2014.

[6] LaMattina, John. Viagra Protects the Heart – Now What? Forbes, online edition, 21 October 2014.

The Author

Kristina M. L. Acri née Lybecker

Kristina M. L. Acri née Lybecker is an Associate Professor of Economics at Colorado College in Colorado Springs, and Chair of the Department of Economics and Business. She earned a B.A. from Macalester College, with a double major in Economics and Latin American Studies, and received her Ph.D. in Economics in 2000 from the University of California, Berkeley. Dr.Acri's research analyzes the challenges surrounding intellectual property rights protection in innovative industries: incentivizing pharmaceutical research and development especially on neglected diseases, addressing the difficulties of strengthening intellectual property rights protection in developing countries, battling the problems related to pharmaceutical counterfeiting and the unique nature of protection for biotech therapies. Recent publications have also addressed alternatives to the existing patent system, the balance between pharmaceutical patent protection and access to essential medicines, and the markets for jointly produced goods such as blood and blood products. Kristina has testified in more than a dozen states on the economics of pharmaceutical counterfeiting. She has also worked with US Food and Drug Administration, Reconnaissance International, PhRMA, the National Peace Foundation, the OECD, the Fraser Institute, the Macdonald Laurier Institute, and the World Bank, on issues of innovation, international trade, and corruption.

Kristina M. L. Acri née Lybecker

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 1 Comment comments.

  1. Mark Summerfield September 22, 2015 8:15 am

    I imagine that Andrew Robb is very well aware that patents and data exclusivity are not substitutes for one another. If they were, then providing both would not significantly extend the protection provided to pharmaceutical companies. What Mr Robb well knows, and what his colleagues in the Health Ministry, as well as the Australian Medical Association, the generic pharma lobby, the bodies representing pharmacists, and many other iinterested groups in Australian society, will be telling him loud and clear, is that creating new regulatory data protections will provide new and complementary exclusive rights to drug developers, and that this, in turn, will increase the costs of healthcare in Australia.

    Australia has a highly socialised healthcare system, so in large degree it is the taxpayer who foots the bill for the supply of drugs subject to exclusive rights. In 2012-13, health expenses accounted for 19% of Australian government budgets. Pharmaceutical costs grew by 65% (compared with GDP growth of 45%) over the preceding decade. These figures concern politicians, they concern doctors, they concern pharmacists, they concern various other special interest groups, and they concern voters generally.

    Australia remains a sovereign nation. Like every other country we have our particular challenges and idiosyncrasies. What many people (i.e. voters) object to is the perceived surrender of sovereignty that can occur in the name of ‘free trade’. Changes to IP protections have social and political implications that go well beyond trade. What the Australian people need to be convinced of is that the benefits of changes in this area will outweigh the costs.

    As a patent attorney, and a person generally in favour of IP protections as an incentive for investment in innovation, I have to say that even I am not convinced. It is not that I disagree with you about the justification for data protection. However, the cost to Australia of introducing such a regime is extremely uncertain, and potentially high, while the benefits (as compared with not doing so) are equally uncertain.

    Andrew Robb is not demonstrating ignorance. He is playing to a ‘home’ audience, and addressing very real Australian policy concerns. It is the hearts and minds of the Australian people you need to win over, and this will not be achieved by attacking a Trade Minister who is perceived to be protecting the best interests of the country.